Choosing an entity:
UK branch vs UK subsidiary

When expanding your business into the UK, you will have to decide whether to open a branch
(a permanent establishment) or a subsidiary (a UK limited company).

Branches

A branch can be thought of as an extension of the parent company’s operations. The branch is dependant on the parent company. As with any business structure, there are both advantages and disadvantages.

The pros

You can convert a branch into a limited company if required at a later stage

An unsuccessful branch may be closed without formal notice

The cons

Your company remains liable for all of the branch’s operations

The branch’s activities will be subject to UK Corporation Tax (currently 20%)

Unfortunately, most UK companies are less than enthusiastic about entering into contracts with companies that are based overseas, as they may be subject to foreign law

Subsidiaries

To set up a subsidiary you will need to create a new UK limited company. It will be a separate legal entity from the parent company. Setting up a subsidiary can be tricky due to red tape, but the autonomy from the parent company definitely outweighs the initial administrative hassle.

The pros

A subsidiary is far more autonomous than a branch

The parent company’s assets cannot be used to settle debts incurred by the limited company

Furthermore, the parent company will not usually be held accountable for the actions or decisions of the subsidiary; this is often called “ring-fencing”

UK companies are far more willing to enter into contracts with subsidiaries as they are wholly governed by UK law

You will not have reconcile your subsidiary’s financial statements with those of the parent company

The cons

Unfortunately, UK company law has complex filing requirements and procedures

If you wish to close a subsidiary, it will take up to six months

An important note on tax

Tax law varies from country to country. It is vital that a company takes local advice on its home country’s tax position with regard to foreign business and the above issues. At the same time, you must fully understand your company’s UK tax position.

Find out more about setting up a UK branch or a UK subsidiary, get in touch with one of our expert consultants.

Croydon

Australia

Melbourne

Sable International is a trading name of 1st Contact Money Limited (company number 7070528) registered in England and Wales. Sable International is authorised and regulated by the Financial Conduct Authority in the UK (FCA no. 517570), the Financial Services Conduct Authority in South Africa (FSP no. 41900) and holds an Australian Financial Services License issued by ASIC to deal in foreign exchange (AFS License number 335 126).